Thursday, 7 June 2018

Greeks hope for an end to austerity later this summer

The Greek flag flies beside construction work on new apartments in Rethymnon … but is the economy beginning to recover? (Photograph: Patrick Comerford, 2018)

Patrick Comerford

Tourism has helped to cushion many parts of Crete against the worst effects of the economic crisis that began in 2010.

The height of the tourist season has yet to arrive, and Greece is expecting 32 million visitors this year, more than double the number in 2010 (15 million) and five times the number 10 years ago.

This increase in tourist figures is a boost to the economy, but many people here are now questioning how long this can continue to be good for Greece, and whether these patterns are sustainable.

Although one in five Greeks work in the tourism sector, many people are beginning to wonder about the impact of tourism on the Greek infrastructure and even on the Greek way of life.

Commentators and journalists are saying that after a decade of economic pain, Greece appears to be back on track, although it still faces challenges. The Financial Times reported earlier this week that after eight years, the era of international financial rescue programmes for Greece will draw to a close in August.

Greece is expecting to leave an eight-year dependency on international financial bailouts in August and to repay those debts. Growth is showing some signs of a rebound, and the Prime Minister, Alexis Tsipras, has even declared a recovery. Speaking earlier this week, he said Greece intends to wind up the fourth review of the country’s third bailout in time for the meeting of eurozone finance ministers a fortnight from now [21 June].

Economic growth is expected to reach 2% this year [2018], 2.4% in 2019, 2.3% in 2020, 2.1% in 2021 and 1.8% in 2022. At the same time, the country’s unemployment rate is seen falling to 19.9% this year and to 14.3% by 2022, according to a report published this week [5 June 2018] by the Finance Ministry’s Mid-term Framework for Fiscal Strategy.

The report sees Greece producing primary budget surpluses of more than 3.5% of GDP that reach up to 5.19% in 2022.

With parliamentary elections due next year, his left-wing party Syriza is trailing the conservative opposition party, New Democracy, in opinion polls. Progress under the Tsipras government includes eliminating the budget and current account deficits, boosting exports and embarking on other reforms. Now with Greece expecting to exit its third and final rescue programme in August, Tsipras may decide to bring forward the election date, and call an early election in October.

Yet Greek public debt is more than 180 per cent of GDP, the economy has shrunk by a quarter in these crisis years, and growth is still modest almost a decade after the first EU-IMF bailout of Greece in 2010.

Many Greeks see Germany as the principal enforcer of austerity, demanding severe cuts in pensions, salaries and the public sector in return for €326 billion to reduce Greek debt, and they blame the German Chancellor, Angela Merkel, for their plight.

But others lay the blame at successive governments that mismanaged the economy, failed to end corruption and avoided dealing with the deep structural problems in public administration, tax collection, the judicial system and business regulations.

At least a fifth of Greeks are still unemployed, the economy is still smaller than it was a decade ago, and tourism – despite all the questions about its sustainability and whether it is good for the Greece in the long-term – remains one of the few growth sectors in the Greek economy.